FHA mortgage insurance is called MIP (Mortgage Insurance Premium) and is collected two ways, up-front and per month. Over the last few years, FHA has already increased the MIP several times. Unfortunately, they are back at it again. Effective with all case numbers assigned on or after April 1st, the up-front MIP is increasing from 1% to 1.75% and the monthly MIP is increasing from 1.15% to 1.25% (this is an annual % which you multiply times the loan amount and divide by 12 to get the monthly MIP amount).
FHA has given two main reasons for these increases. The first is to rebuild the agency’s capital reserves, and the forecast is that these increases will add another $1.25B. in revenue per year. The second is to encourage the return of private capital back into the residential mortgage market. Put another way, FHA is trying to discourage the use of the FHA program and hoping more sources of alternative financing will
To put these increases in perspective, on a $150,000 purchase, the .75% up-front increase will add about $1000 to borrower’s loan amount and increase the payment about $5 a month. The .1% monthly increase will also add another $12 a month to the payment. Thus, the combined effect of these changes is a $17 per month increase to the payment. This equates to an increase of $11 per month on a $100,000 purchase and $23 per month on a $200,000 purchase.
These MIP increases are not wonderful news for FHA buyers but they have created an incentive for these buyers to get a house under contract and make sure their lender gets the FHA case # ordered by Mar 30th.
This entry was posted on Monday, March 12th, 2012 at 8:20 am. and is filed under Buyer Tools, Feed, First Time Homebuyers, Mortgage Insurance, Mortgage News, News & Reports, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.